A tightening gap between sales listings and transactions is placing Perth in a prime position to experience a more competitive market in the new year, according to WA-based property investment consultancy, Momentum Wealth.
Their forecast is based upon figures from the Real Estate Institute of Western Australia, which recently noted overall stock for sale in Perth has experienced a rapid decline since the start of the year, falling from a high of 17,251 in March 2019 to just 14,044 properties listed at the start of December.
Team Leader of Momentum Wealth’s buyer’s agents, Emma Everett, said the absorption of existing supply and higher sales transactions are triggering a return to a balanced market in some sectors.
“Over the past 12 months, we have seen significant absorption of the oversupply left over from the mining and construction boom which, when combined with a rise in sales transactions, is causing stock on market to tighten, with the market now approaching equilibrium at just over 14,000 properties listed for sale,” she said.
Sales activity in Perth has followed an upward trajectory since the middle of the year, with transactions averaging at 650 sales per week in November 2019 compared to 479 in May just five months prior.
Mrs Everett said some of the rise in activity is likely due to renewed certainty following the conclusion of the Federal Election.
“Activity was visibly subdued in the first half of 2019, with buyers likely taking a more cautious approach due to uncertainty surrounding potential changes to negative gearing and their impact on the property market.
“The fact sales activity has trended higher in the latter half of 2019 suggests this certainty has now been somewhat restored”, she said.
While sales activity is rising, data from CoreLogic showed that new sales listings have dropped considerably, with the state capital recording the lowest number of new properties for sale in November 2019 since the research consultancy began recording the statistic in 2007.
Mrs Everett attributes this to a more positive outlook amongst existing property owners in Perth.
“We are seeing an uplift in sentiment amongst many of the owners we are speaking to on the ground, with those who have previously considered selling due to softer market conditions now reluctant to do so having recognised the market is turning a corner.
“These owners are prepared to hold onto their properties to achieve a better result, and with record low interest rates and improving rental conditions, they aren’t facing the same cash flow pressures they may have been a year ago,” she said.
Perth’s rental market has seen a number of significant improvements across the last 12-18 months, with rental vacancy rates dropping to 2.4 per cent in December 2019 according to REIWA figures – more than five per cent lower than their peak of 7.6 per cent in August 2017.
Mrs Everett said that with the supply fundamentals in place, it’s now a case of demand.
“Average days on market in Perth is still relatively high at 84 days for the September quarter, suggesting we aren’t yet seeing that sense of urgency we would expect to accompany an increase in demand from buyers.
“However, with much of the oversupply in a number of areas now absorbed and low levels of supply coming on stream from new construction, stock levels are poised to tighten even further into 2020, which will drive higher levels of buyer competition, in turn placing upwards pressure on prices in some locations,” she said.
CoreLogic figures released earlier this month showed that Perth dwelling values recorded an annual increase of 0.4 per cent in November, marking the first month-on-month increase since early 2018.
Mrs Everett said that suburbs with strong demand fundamentals in place are already seeing higher levels of competition from buyers.
“While market improvements are now starting to translate into headline growth figures, we have seen higher competition in certain segments of the market for some time, particularly in the upper price segment of the market where owner-occupiers have been taking advantage of softer conditions to trade-up into their suburb of choice, and we expect this to spread further into the market in 2020″ she said.
Momentum Wealth Research Advisor, Shaun Strickland, said a number of factors place Perth in good stead to experience an increase in demand in the short-to-medium term.
“While we have seen a lowering in Perth’s unemployment rate, activity in the mining sector is also undergoing a resurgence, which holds positive prospects for future job and population growth, both of which are key drivers for the property industry.
“With levels of affordability in Perth at their highest since September 2004, and considerably higher than those in Sydney and Melbourne, Perth certainly presents an attractive option to local and interstate investors heading into 2020,” he said.